Kirkland’s Cuts Costs To Reinforce Business

Kirkland’s is taking additional measures in response to the impact on its business from the coronavirus, expanding its e-commerce initiatives while reducing costs.

The retailer has extended the closure of all of its 405 stores to customer traffic, instead offering contactless curbside pickup at over 300 of its stores during specific hours, as permitted. It has also focused offers and promotions on its e-commerce business through its website.

After paying all store team members during the first two weeks of closure, the company has furloughed all part-time store employees and temporarily reduced the pay of full-time managers and key employees. Kirkland’s also permanently reduced 33% of distribution center indirect labor and furloughed 30% of direct labor, while further reducing hours to match demand; and permanently reduced headcount at its corporate headquarters by approximately 18%, in addition to the 14% reduction in January and temporarily reduced compensation for the executive team.

Kirkland’s has also cancelled orders and delayed merchandise receipts to manage inventory levels, and extended payment terms with product and non-product vendors to improve working capital. It has also significantly reduced transportation expenses with limited deliveries to stores and the delay/reduction of inbound freight receipts.

To reduce costs, the company said it began negotiations with landlords to defer or waive rent while the stores are closed and accelerated ongoing negotiations with landlords on potential closures of unprofitable stores in addition to the 27 permanent store closures completed in the first quarter of 2020.

As previously disclosed, the company drew down $40 million of its $75 million revolving credit facility.

“With our stores closed to customer traffic to keep our employees and customers safe, we have accelerated our contingency plans across all areas of the company. I’m proud of the innovation of our team as we stood up contactless curbside pickup and immediately saw great results,” said Woody Woodward, CEO, Kirkland’s. “These actions have had a direct impact on many within our Kirkland’s family and were taken to ensure we have the right cost structure and infrastructure for this new environment as well as the liquidity and capabilities to serve our customers online during this pandemic.”